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120 arrested in New York for security fraud

AM Archive - Thursday, 15 June , 2000 00:00:00

Reporter: Agnes Cusack

COMPERE: Authorities in New York have made 120 arrests in what they describe as a massive security fraud involving the mafia and a long list of stockbrokers.

Agnes Cusack reports:

AGNES CUSACK: Federal prosecutors are calling it the biggest securities fraud crackdown in US history. Charges have been laid against 120 people, including members of all five New York organised crime families, stockbrokers, investment advisers, company officials and a detective, all being held in connection with a scheme aimed at infiltrating the securities market.

Investigators say over five-year period the crime syndicate used fraud, bribery, extortion, violence and threats to cheat investors out of $90 million. Charges include crimes ranging from racketeering and extortion to solicitation for murder.

US Attorney Mary-Jo White says the accused had created an investment bank for the crooked and corrupt, their greed knowing no bounds.

MARY-JO WHITE: No kind of market professional or kind of offering or company or type of victim was excluded. The enterprises crimes targeted and victimised investors in publicly traded securities, investors in private placement and pension fund beneficiaries.

AGNES CUSACK: Organised crime figures in New York city are believed to have cheated shareholders by controlling and infiltrating investment houses. The mob is thought to have paid bribes to corrupt brokers and engaged in rigged stock trades. So called 'pump and dump' tactics were used to drive up share prices. Stocks were then sold at inflated values.

The Internet was used to further the scheme for a fraudulent promotion of stocks on web sites and the use of dot-com companies to capitalise on the e-commerce boom.

In order to enforce discipline among brokers and punish those who reneged on agreements to sell stock in return for bribes, the mob is claimed to have used beatings, intimidation and death threats.

Assistant FBI director Barry Morne:

BARRY MORNE: Victims of these schemes received unsolicited phone calls from the defendant brokers offering a can't-lose, low-risk, high-yield investment opportunity. Sometimes the victims were told they could expect a 100 per cent return on their investment.

REPORTER: Authorities believe the mobsters have been attempting to infiltrate Wall Street after being forced out of many of their more traditional rackets and because of the dramatic rises in the value of stocks. They saw easy money to be made.